Reported herein is a reactivity of propargyl alcohols as “Three-Carbon Synthons” in a Rh(III)-catalyzed C−H functionalization of acetanilides, leading to the synthesis of core structures of isocryptolepine, γ-carbolines, dihydrochromeno[2,3-b]indoles, and diindolylmethanes (DIM) derivatives. The transformation involves a rhodium(III)-catalyzed C−H functionalization and heteroannulation to yield indoles followed by a cascade cyclization with both external and internal nucleophiles to afford diverse products. The role of the hydroxy group, the key function of the silver additive, the origin of the reverse regioselectivity and the rate-determining step, are rationalized in conformity with the combination of experimental, noncovalent interaction analysis and DFT studies. This protocol is endowed with several salient features, including one-pot multistep cascade approach, exclusive regioselectivity, good functional group tolerance and synthesis of variety of molecular frameworks.